Definition
Fiat-backed stablecoins such as USDT and USDC hold reserves that are meant to back each token. They are the main way traders move in and out of positions. Algorithmic stablecoins try to hold the peg with code instead; TerraUSD's collapse in May 2022 showed the risk.
Watch out for
A stablecoin is only as safe as its reserves and issuer. De-pegs have happened.